UBS on Gold: Zurich, Switzerland-based brokerage firm UBS has increased its gold price forecasts, anticipating higher investment demand, a decline in US real rates, a seasonal uptick in jewellery consumption, and continued central bank purchases.
“We raise our gold forecasts to $2,750 per oz by end-2024 (from $2,600 per oz), $2,850 per oz by mid-2025 (from $2,700 per oz), and $2,900 per oz by end-3Q25 (from $2,750 per oz),” Wayne Gordon, Giovanni Staunovo and Dominic Schnider of UBS said in a note.
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Meanwhile, here are the key drivers of the outlook by UBS:
Records galore!
Gold recently hit an all-time high of $2,685.42 per ounce on September 27, driven by persistent economic growth, geopolitical tensions, and a weakening US dollar alongside lower 10-year US bond yields, analysts said.
While some price consolidation may occur in the short term due to the rapid price increases, UBS analysts noted that recent pullbacks have been short-lived, leading investors to chase prices higher throughout the year.
WGC view on Gold
The World Gold Council (WGC) pointed out that gold typically rallies by up to 10 per cent within six months after the Federal Reserve’s first rate cut.
Given that gold is starting from a higher baseline than previously anticipated, the potential for gains by year-end seems promising, especially with the upcoming US election increasing uncertainty and a rise in Exchange Traded Funds (ETF) demand.
Despite recent data indicating a slowdown in Chinese gold demand, analysts suggested this may be more about quota limitations rather than a fundamental decline in local investor interest.
That said, UBS analysts continued to stress upon gold’s value as a long-term portfolio hedge.
“We continue to recommend gold’s hedging qualities as being attractive for the long term from a portfolio perspective. We reiterate our recommendation for a diversified USD-denominated portfolio to include a 5 per cent allocation to gold as a broad portfolio hedge,” UBS analysts said.
First Published: Sep 30 2024 | 1:24 PM IST
